Navigating the Seas of Protection: A Comprehensive Guide to Boat Insurance

Ah, the open waters! There’s something truly liberating about setting sail and exploring the vast expanse of the ocean. But with the freedom of owning a boat comes a responsibility to protect your vessel and those aboard. That’s where boat insurance comes into play. In this blog post, we’ll dive deep into the world of boat insurance, exploring different types of coverage, including marine insurance, personal leisure, commercial use, and charter lines.

Understanding Marine Insurance

Marine insurance serves as a broad term encompassing insurance coverage for various types of vessels, including boats, yachts, sailboats, and more. It typically provides protection against risks such as theft, damage, accidents, and liability. Marine insurance can be further categorized into personal leisure and commercial use insurance, depending on the purpose of your boat.

Personal Leisure Boat Insurance

For boat owners who use their vessels primarily for personal leisure activities, personal boat insurance is a necessity. This type of coverage is designed to protect your boat and its equipment, as well as provide liability coverage in case of accidents that cause damage to other boats or injuries to individuals. Personal leisure boat insurance can be customized based on the value of your boat, navigational range, and additional coverage options such as towing, salvage, and fuel spill liability.

Commercial Use Boat Insurance

If you utilize your boat for commercial purposes, such as chartering, fishing, or transporting goods, personal leisure boat insurance may not be sufficient. Commercial boat insurance is tailored to the specific needs of businesses and typically includes coverage for business equipment, cargo, passengers, and liability arising from commercial activities. Depending on the nature of your business, additional endorsements like pollution liability or professional liability insurance may also be necessary.

Charter Lines Insurance

Charter lines operate in a unique space, as they provide boat rentals to individuals or groups for recreational purposes. Boat owners who engage in chartering their vessels should consider obtaining charter lines insurance. This specialized coverage protects both the boat owner and the charterer, providing liability coverage in case of accidents, damage to the boat, or injuries to the charterer. It’s crucial for charter lines operators to carefully evaluate their insurance needs and select coverage that adequately protects their assets and passengers.

Key Factors to Consider

When exploring boat insurance options, several factors deserve consideration. These include:

  • Boat Value and Replacement Cost: Determine the value of your boat and opt for insurance coverage that adequately reflects its worth. Replacement cost coverage ensures that you receive compensation equivalent to the current market value of the boat in case of a total loss.
  • Navigation Area: Inform your insurance provider about the geographical limits within which you intend to operate your boat. Some policies have restrictions on navigational range, and you should ensure your coverage aligns with your intended usage.
  • Liability Coverage: Liability coverage is critical in protecting you against legal claims arising from accidents or injuries caused by your boat. Adequate liability limits will provide peace of mind in the event of an unforeseen incident.
  • Deductibles and Premiums: Understand the deductibles and premiums associated with your policy. A higher deductible might lower your premiums, but be sure to choose an amount that you can comfortably afford in case of a claim.

Owning a boat is a thrilling experience, but it’s essential to navigate the waters of boat insurance to protect your investment and ensure the safety of everyone on board. Whether you’re a leisure boat owner, commercial operator, or charter lines provider, understanding the nuances of marine insurance and selecting the right coverage will provide peace of mind and financial security. So, hoist your sails, set a course, and embark on your nautical adventures with the confidence of being well protected!

Understanding Boat Insurance

A comprehensive guide to finding the right boat insurance coverage.

Insurance coverage is the same from company to company, right? While that may be true for many kinds of insurance, it is not necessarily true for boat and yacht insurance. Marine insurers providing boat and yacht insurance offer a wide range of coverage suited to that company’s level of expertise, underwriting appetite, and type of client they wish to attract.

This article attempts to describe the basic coverage that is available under boat and yacht insurance policies, and the items that should be considered before selecting a policy*. We will also point out the factors that the marine underwriter contemplates when determining the rate to charge a client. We hope that this will assist in making a more informed decision when purchasing insurance for your boat. Only you can decide on the right combination of coverage and price that suits your needs.

Start with the basics

Let’s start by describing the two basic sections of a typical boat or yacht insurance policy: physical damage and liability. The physical damage section covers accidental loss or damage to the boat and its machinery. This not only covers the hull and the engine(s), but also the sails, personal property, and other equipment on board that are required to operate the boat.

The liability section, sometimes referred to as Protection & Indemnity, covers your legal obligations to third parties. This legal liability can arise from bodily injury or loss of life, or damage to someone else’s property, as a result of the ownership or operation of your boat. Liability coverage also helps pay for your legal defense if you are sued for an occurrence that may be covered under your boat insurance policy.

Physical damage — What losses are covered?

Physical damage coverage generally pays for repairs to your boat that are necessary as a result of damage caused by a wide range of perils. The best policies provide “all risk” coverage, which means that if the cause of loss is not specifically excluded, it is covered. Typical causes of loss that are covered include: weather-related perils such as wind, rain, hail, lightning and wave action; fire; loss or damage caused by theft or vandalism; and collisions with docks, submerged or floating objects or other boats. It is wise to select a policy that continues to cover your boat while it is stored on land, or while you transport your boat over land by trailer.

The boat owner has the responsibility to maintain their boat, and so normal wear and tear is often excluded under a boat or yacht policy. The number and type of physical damage exclusions vary from company to company, so take the time to compare to avoid surprises later.

Loss settlement – Agreed Value vs. Actual Cash Value

When comparing physical damage coverage, the most significant difference that can be found among boat or yacht insurance policies is whether the coverage is based upon “Agreed Value” or “Actual Cash Value” (ACV) loss settlement. Agreed value policies normally pay the amount shown on the policy if the boat is considered to be a total loss. Under such a policy, damage resulting from a partial loss is generally paid for on a replacement cost (new for old) basis, less your deductible; that is, physical depreciation will not be factored into determining the value of the lost or damaged items. However, some items that are subject to higher amounts of normal wear and tear, such as canvas, sails, trailers and some machinery, may be subject to allowance for depreciation in the event of a covered loss.

An Actual Cash Value policy provides less coverage than an Agreed Value policy, but generally at a lower cost. An ACV policy provides coverage up to the current market value of the vessel in the event of a total loss, taking into account depreciation and potentially other factors. Payments made for partial losses are usually reduced based upon physical depreciation of the lost or damaged items, and the policy deductible is also applied.

Your insurance professional can help you determine which type of policy is right for you.

Personal Property and Emergency Towing & Assistance

Two additional coverages often found in boat and yacht insurance policies are: Personal Property coverage, and Emergency Towing & Assistance coverage. Personal Property coverage includes such items as clothing, personal effects, and sports and fishing equipment while those items are being loaded/unloaded and while aboard your boat. Similar to physical damage coverage, there are exclusions that vary from company to company, so it pays to compare.

Emergency Towing & Assistance coverage reimburses you for the costs that you incur when you need emergency assistance for your boat, and you and your boat are not in immediate danger. Some examples of emergency services that you may need which may be covered include: towing to a place where repairs can be made; delivery of fuel, oil or parts; or emergency labor while underway. Check beforehand to determine whether a deductible applies to this coverage or if there is a maximum annual limit for multiple towing claims.

Liability – Other important coverages

The liability section of a comprehensive boat insurance policy provides many coverages that are important to boat owners. Coverage for the removal or disposal of the wreck of your boat is important to have, especially if the wreck is deemed to be a hazard to navigation. Boat owners may also be responsible for any containment and clean-up expenses resulting from oil pollution or contamination caused by their vessel. It’s important that your boat or yacht insurance policy covers your liability for those clean-up expenses because vessel owners are liable under the Oil Pollution Act of 1990 up to the statutory limit (currently $939,800). If you ever intend to borrow someone else’s boat, confirm that your liability coverage extends to the other boat. This is called “non-owned” or operating other watercraft boat liability coverage. Finally, boat owners who employ paid crew members should ensure that their policy covers their liability to the crew under the Jones Act and General Maritime Law.

A good policy will also provide a separate coverage for your liability under the Federal Longshore and Harbor Workers’ Compensation Act. This will cover your statutory liability to temporary shore-based workers, such as a mechanic or marina employee, if they become injured aboard your boat.

Most boat and yacht policies exclude coverage while your boat is chartered to someone else, or used to carry passengers for a fee. Under the right circumstances, a good marine insurance company may extend your coverage to include those situations. So ask first to ensure that you will be properly protected.

Medical Payments coverage

You should verify that your policy has an adequate limit of coverage for Medical Payments. Medical Payment coverage will pay for first aid treatment, ambulance, hospital and other costs that result from someone being injured on your boat, even if you are not legally responsible. It is important to ascertain whether the coverage also applies while someone is boarding or leaving boat, and while being towed behind your boat, such as while water skiing. Check to make sure that injuries to you and your family are also included in this coverage. Given equal amounts of insurance, coverage on a “per person” basis may be preferable to coverage on a “per accident” basis.

Uninsured/Underinsured Boater coverage

Since boat liability insurance is not mandatory, there are many boaters operating without liability coverage. Uninsured Boater coverage is designed to compensate you for injuries sustained aboard your boat that are caused by an operator of another boat who has no liability insurance.

Factors impacting the cost of insurance

The underwriter must consider many factors when determining the rate (or premium) to charge for a boat policy. The most common determinants are: value, length, and age of boat; type of boat (i.e. power, sail); type of engine(s); mooring location; intended area of navigation; previous boating experience and claim history of the owner; and deductible amount. Sometimes the underwriter will also consider the automobile driving record of the owner(s), and whether they have taken any safe boating courses. There are several ways that you can reduce the cost of your boat insurance. The most common way is to select the highest deductible amount that you are comfortable with. In general, physical damage deductibles start at around 1% of the insured value of the boat, and can be increased to sometimes as much as 5%. Each higher deductible amount reduces your insurance premium. Think about how much you could affordably pay out of pocket if a loss occurred.

Many yacht policies include a lay-up period, which is a time that the yacht is normally laid up and out of commission, such as during the winter months in colder climates. The underwriter will normally allow a discount for each month that the yacht is decommissioned. You can usually reduce your premium by requesting the longest possible lay-up period that would be reasonable for your part of the country.

Think about where you will actually be operating your boat. If you consistently navigate close to your home port, you should inquire whether a more limited navigational area on your policy can save you money. In other words, you may not need coverage for the entire east coast of the U.S. when you only operate your boat in Maine.

The condition of your boat was also mentioned as a rating factor. If you own an older boat, the underwriter may request a recent marine survey of your boat before quoting or insuring it.

Lastly, installing certain safety devices on your boat can sometimes reduce the premium that you will pay. Some marine insurers will give credits for such safety items as: an automatic fire extinguishing system in the engine compartment, a fume or vapor detector in the bilge, or certain anti-theft alarm or tracking devices.

Seek out marine insurance specialists

Now that we’ve described some of the key elements of boat and yacht insurance policies, we hope that you are in a better position to ask the right questions when buying marine insurance. It is also wise to work with a company that thoroughly understands boat and yacht insurance. This is important not just at the time that you apply for insurance, but also in the unfortunate event that you have a claim. Chubb Recreational Marine Insurance has the expertise to help you at every step along the way.


What the Next Generation of Art Collectors Should Know About Risk

Preserved animals as conversation pieces. Canvases covered in chewed bubble gum. Seven-figure acquisitions completed on a mobile phone. New media, new genres, and new sales channels are just a few of the ways in which art collecting can differ for the next generation of collectors.

Emerging markets and exciting new media may appeal to younger collectors, but they can present unexpected risks as well. If your clients are among the 65% of wealthy individuals who expect to purchase fine art in 2023 (UBS Art Basel 2023 Report), understanding what, why, and how your clients buy can position insurance agents and other advisors to better help them protect and preserve their investment.

From bubble gum to bodily fluids

Next generation collectors have largely shifted their focus away from Impressionist or Modern works and toward Post-War, Contemporary and Ultra-Contemporary artists. Some of these 20th- and 21st-century works present new stewardship challenges as artists explore new media.

Consider, for instance, Marc Quinn’s “Self” series. Frozen portraits of the artist’s head are made from 10 pints of his own blood; a new iteration is created every five years. Described by Quinn as a “frozen moment on life support,” these works evoke the fragility of existence, and are displayed in special refrigerated cases requiring uninterrupted power.

Other artists have used food products, like bananas, chocolate, or bubble gum as mediums in their artwork. The resulting works may change over time as materials deteriorate and fade — often an intended consequence, yet one that requires expert attention to care and preservation. Infestation and spoilage are potential hazards any time an artist utilizes food products in their art, and temperature and humidity controls must be monitored to help minimize deterioration.

Taxidermy and other animal preservation methods may not be mediums one might expect to interest the next generation of collectors, but they have been incorporated into works by several renowned contemporary artists, like Damien Hirst and Maurizio Cattelan. Collectors should consider risks such as infestation if items are improperly preserved, or the potential for fire attendant with combustible liquids like formaldehyde, which Hirst often uses in his vitrine works.

These examples illustrate how artwork made with novel materials can present unique considerations in terms of care. The usual environmental controls, such as lighting and climate, remain vital but may need to be adjusted to fit the composition of the piece.

In addition, some of these works may be subject to what insurers call “inherent vice” — a quality of a work that contributes to its natural deterioration. It is important for collectors to know that inherent vice is a common insurance exclusion.

As an advisor, these challenges also represent opportunity. Given next-generation preferences for consultative services, connecting with clients who collect this type of art can help advisors deepen their relationships.

Art conservators, for instance, can help identify unstable materials or inherent structural issues of a particular piece before a collector makes a purchase. They can also consult on ideal display conditions to protect and preserve even the most delicate works. Art handlers can advise on the most appropriate installation hardware based on a work’s size and characteristics. After installation, art handlers should be consulted on a regular basis to determine whether picture wires and hanging devices have weakened over time, putting works at risk. Risk advisors can help collectors identify and minimize art risks, from transit to storage to display. They can also advise collectors on insurance-buying needs and decisions.

It’s about the idea

Conceptual art — another art form popular with next-generation collectors — differs from other forms in that the idea is more important than the work itself. When your clients purchase a piece of conceptual art, they receive a certificate of authenticity with a detailed set of instructions on how to create the work.

Once purchased, the artist, studio, or new owner will have the piece installed according to the artist’s plan and direction. Because the concept is the most important part of the work, conceptual artwork can typically be “re-created” as needed — for example, artist Sol LeWitt’s series of “wall drawings” can be installed, destroyed, and reinstalled in new locations, as long as the original diagram and instructions are followed.

Since the value of this artwork lies in the concept rather than in the physical work itself, a lost certificate translates to lost value. Some artists (or their foundations, if the artist is deceased) will reissue certificates, but others will not. Clients who purchase conceptual art should keep the certificate in a secure place to maintain its value.

Art democratized

In addition to collecting new media, many next-generation art collectors are purchasing art through new channels. They are using Instagram and other social media platforms to gain access to art world insiders and educate themselves with “behind the scenes” information. A “like” from a well-known curator or auction house specialist can validate an emerging artist and help expand awareness of their work.

Travel to major centers such as New York or Los Angeles is no longer a necessity — collectors can engage directly with galleries and museums online. During the pandemic, auction houses and galleries focused their efforts on online sales, with digital sales reaching an historic peak of $12.4 billion in 2020, doubling in size year-on-year.2 Now, Christie’s reports that nearly half of its sales are held online and 75 percent of auction bids are placed digitally.3 In addition, art fairs now have online viewing rooms that allow collectors to preview artwork, engage with dealers, and make acquisitions without the need to attend in person.

Purchasing art that hasn’t been physically seen has its risks. If your clients buy online, encourage them to request a condition report and provenance information before making a purchase. It’s also important to ask about packing and shipping, since transit is a major cause of loss or damage to art. The seller should be using a shipper that specializes in fine art rather than a general carrier. Collectors should also inquire about who should insure the artwork after the purchase. Some sellers will insure an item during transit until it is delivered to the purchaser; others expect the purchaser to provide proof of insurance before they’ll release the artwork.

Art as an investment

For the next generation of collectors, art remains a passion, and that passion drives their purchase decisions. However, many wealthy collectors are increasingly viewing art as an investment as well.

According to the UBS/Art Basel 2023 Report, billionaire wealth has grown by over 380% and sales of pieces over $10 million at fine art auctions has increased by close to 700%, showing that the growth of wealth has fed into the art market, with wealthy collectors investing significantly more in art than in past years.

Millennials are a generation that entered the workforce around the time of the 2008 financial crash, and studies have shown the lasting impact of that event on their investment approach. In fact, millennials are less likely to invest in stocks than other generations5 and when they do, they let their personal values guide their investment choices6 – much like they do for art, with millennial buyers viewing art through a social and investment values lens.

If your clients are building an art portfolio for investment purposes, it’s important for them to have a plan for care, maintenance, and insurance. Some investment-minded collectors may be more likely to store their art rather than display it at home, and the growing fine art storage industry reflects this trend. Others may lend artwork to museums to raise a work’s profile and build up its provenance. Clients whose art moves frequently are typically more exposed to shipping losses. Those who lend or consign art need to understand whose insurance is covering their piece and whether that coverage is adequate for the exposure. Points to consider include whether a borrower or consignee’s policy provides “wall-to-wall” coverage, worldwide, for most causes of loss. Collectors should also work with their insurance agent to review details regarding security and protection at these locations.

In many ways, next-generation art collectors are like the generations before them: aesthetically motivated, passionate, and discerning. Understanding how they are different, and how these differences affect their risks, will position advisors to provide valuable insight that helps them to protect and preserve their possessions for years to come.

Source: CHUBB